Applications of stock index options for income enhancement

John Burrello, Frank J. Fabozzi (), Han Liang, Anil Sood and Kari Vatanen
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John Burrello: Invesco
Frank J. Fabozzi: Johns Hopkins University
Han Liang: Invesco
Anil Sood: Ernst & Young LLP
Kari Vatanen: Elo Pension Insurance Company

Journal of Asset Management, 2024, vol. 25, issue 6, No 4, 579-588

Abstract: Abstract Three real-world applications of derivatives in managing equity portfolios focusing on enhancing income using stock index options are illustrated in this article. Where these strategies are applied, providing practical examples and detailed analyses of their outcomes, is explained. The common pitfalls of option income strategies, particularly the impact of market volatility on yields, and how adjusting strike prices systematically can help achieve more stable income are described. This strategic insight is crucial for portfolio managers looking to enhance their income while managing risk effectively in their equity portfolios.

Keywords: Stock index options; Covered calls; Income enhancement; Option premium; Market volatility; Cash-secured puts (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41260-024-00366-z

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